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WHAT ARE THE ADVANTAGES OF INCLUDING ALTERNATIVE DISPUTE RESOLUTION MECHANISMS IN THE CONTENT OF A LEASE CONTRACT?

From the determination of the physical space for the development of a business activity to the temporary acquisition of equipment and work tools, including the establishment of a family home or even the satisfaction of recreational and personal needs, it is undeniable that the lease contract has become an extremely recurrent aspect within the social and commercial dynamics, since its execution is practically indispensable in multiple scenarios.

However, no matter how deeply rooted this legal figure is in everyday life and in the momentum of commerce, the risk of non-compliance with the obligations derived from the lease contract continues to be a latent reality, and can lead to the judicialization of disputes, which inevitably entails a considerable investment of economic resources, a significant expenditure of effort and a delay in the resolution of the conflict, factors that affect both lessors and lessees.

It is not a matter of understanding whether a breach of a lease is likely, but of understanding that it is always possible.

Under such circumstances, how then can lessees or lessors protect themselves against the possibility of non-compliance with an act as elementary and habitual as a lease? Although traditional justice may be the first thought that comes to mind, the truth is that there is a much more agile, effective and economical solution: alternative means of conflict resolution.

Alternative means of conflict resolution, or better known as "ADR", are "procedures different from jurisdictional ones that aim to resolve conflicts arising between parties with a problem of interests" (De Villa Cortés and Márquez Algara, 2013, p. 1587), or in other words, they are mechanisms that seek to resolve disputes or legal controversies without the need to attend a traditional jurisdictional instance.

The usefulness of ADR in the face of the latent possibility of default under a lease can be analyzed from two equally important perspectives:

  1. Under a preventive approach to conflict:

The best way to implement the preventive approach to ADR in a lease is through what is known as a "preventive lease agreement".

The main objective of this strategic agreement is to guarantee stability and legal certainty in the relationship between lessor and lessee from the very beginning of the contract, anticipating possible disputes and establishing the use of ADR as a resolution mechanism for any dispute that may arise.

From its conception, this preventive agreement incorporates clear and detailed provisions on how eventual disagreements will be handled, specifying the causes that could give rise to a breach and the corresponding clauses for enforcement.

It is not simply a document that regulates a lease relationship, but a manifestation of foresight and professionalism that allows both parties to act with the certainty that, in the event of any controversial eventuality, there would be an orderly and efficient path for the resolution of conflicts, without their rights being hindered in the complex and exhausting procedural maelstrom of the traditional justice system.

Including a pre-emptive covenant in a lease not only reduces the likelihood of protracted litigation, but also encourages more efficient and equitable solutions for both the lessee and the lessor.

  1. Under a conflict resolution approach:

When there is a breach of the lease contract, such as non-payment of rent by the lessee or non-delivery of the property by the lessor, ADR facilitates dialogue between the parties involved.

  1. Under a conflict resolution approach: When there is a breach of the lease contract, such as non-payment of rent by the lessee or non-delivery of the property by the lessor, ADR facilitates dialogue between the parties involved.

The invaluable relevance of ADR in the structural analysis of the conflict arising from the breach of a lease contract lies in its ability to privilege the resolution of the dispute from a perspective that transcends the mere confrontation of legal rights and claims.

That is to say, instead of focusing on a strictly legal-positional dispute between the parties, these means of dispute resolution are aimed at getting closer to the core of the dispute, making it possible to unravel underlying factors at the root of the conflict, such as the personal tribulations of the lessees, the lessor's insufficient understanding of his duties or, on occasion, the simple existence of a misunderstanding in communication between the parties.

Thus, through the application of ADR, the dispute arising between lessor and lessee acquires an analytical depth that goes far beyond the mere confrontation of rights and obligations typical of a conventional jurisdictional instance.

However, beyond the preventive and resolutive approach of ADR in the context of disputes arising from a lease, what are the advantages that ADR offers to both the lessor and the lessee when it has been integrated into the lease contract?

From an eminently pragmatic point of view, the most conspicuous of these advantages lies in the avoidance of the economic wear and tear involved in ordinary litigation, which, by its intrinsic nature, tends to drag on indefinitely, requiring substantial outlays in legal costs, legal fees and possible indemnities.

Under this scenario, the procedural economy guaranteed by ADR favors the speedy resolution of the lease dispute and minimizes legal uncertainty, providing the parties with an expeditious, fair and less burdensome solution.

No less relevant is the preservation of the legal relationship between lessor and lessee, since contentious procedures, by virtue of their confrontational habitat, tend to erode contractual ties, leading to ruptures that may be irreconcilable for the parties. In contrast, ADR encourages dialogue and cooperation between lessor and lessee, favoring the harmonization of interests through the conclusion of equitable agreements, where both wills find satisfaction without the need to resort to the coercive intervention of the judicial apparatus.

Furthermore, ADR gives the parties to the contract a greater sphere of self-determination in the management of their own conflicts, that is, unlike the jurisdictional process, where the resolution is imposed by a third party vested with decision-making power, ADR gives the parties the power to actively influence the construction of the solution, allowing them to reach a consensus that addresses their particular interests in a more specific and personalized manner.

Finally, the implementation of ADR provides leasing with unprecedented flexibility, i.e., while the rigidity of traditional courts imposes deadlines, formalities and mandatory requirements, mediation, conciliation and negotiation make it possible to adapt the process to the particular circumstances of the conflict and the parties, enabling creative solutions that are not within the conventional spectrum of judicial resolutions.

In conclusion, the insertion of ADR in leasing contracts is a very effective palliative resource for the inherent conflict in the leasing relationship, and furthermore, a sophisticated tool that optimizes the economic protection of the lessor and the lessee, not to mention that it widens the margins of material justice, enhancing efficiency and rationality within the many applicable cases of leasing.

 

References.

De Villa Cortés, J. C. & Márquez Algara, M.G. (2013). Alternative means of conflict resolution. In Human rights in the Constitution. Comments on constitutional and inter-American jurisprudence. (pp. 1587-1601). Instituto de Investigaciones Jurídicas, Suprema Corte de Justicia de la Nación, Konrad Adenauer Foundation. https://biblio.juridicas.unam.mx/bjv/detalle-libro/3568- derechos-humanos-en-la-constitucion-comentarios-dejurisprudencia-constitucional-e-interamericana-t-ii.

Eduardo Velasco López
Content Coordinator at LEGAMY
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